Essays on export and firm heterogeneity: Technology spillovers and the decision to export

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This dissertation consists of two studies. The first is about technology spillovers associated with exports. The second study analyses factors affecting firms‘ export decision, focusing on the role of competition in domestic market. The findings of these studies have important policy implications. For example, if exports are found to be a viable conduit for technology transfers, policies that promote exports may be implemented to accelerate economic growth. Most previous studies examined whether exports facilitate technology spillovers by comparing the productivity levels of exporter and non-exporters. The idea is that if there is learning-by-exporting, the productivity gap between exporters and non-exporters should increase over time. For instance, using this approach, Clerides et al (1998) and Bernard and Jensen (1999) conclude that there is no learning-by-exporting. There are two problems with this method. First, non-exporters may not be a valid benchmark. If there are spillovers from exporters to non-exporters, the productivity gap between them may not necessarily increase despite the present of learning-by-exporting. Second, to the extent that learning-by-exporting is a costly activity, it diverts some resources away from the current production and therefore causes a decline in productivity level. However, as the learning enhances the exporting firm‘s productive capacity, the rate of productivity growth is expected to be greater for exporters than for non-exporters. While the higher rate of productivity growth enjoyed by exporters will eventually widen the productivity gap, this productivity differential may not be significant if the sample used covers only a short period. This calls for separating the rate and level effects of technology spillovers and separating the spillovers due to learning-by-exporting (international spillovers) and spillovers from exporters to non-exporters (domestic spillovers). We extend the models developed by Ehrlich et al. (1994) and Liu (2008) to show how spillovers affect firm productivity. Using a sample of Korean manufacturing plants for the period 1990 to 1999, we find strong evidence for the positive spillovers stemming from learning-by-exporting and from exporters to non-exporters. In the empirical estimations, we address a number of econometric issues, such as simultaneous and self-selection biases. Much of the literature on the effect of market structure on firms‘ export decision assumes a linear relationship between competition and the propensity to export. Some argue that competition forces firms to improve their productivity, and firms with higher productivity are more likely to export. Others argue that monopolists are more likely to export because they have greater incentive to innovate and therefore are more productive. These two diametrical arguments are confirmed empirically by Poddar (2004) and Zhao et al. (1998), respectively. We argue that, since productivity is a key determinant of firm‘s export decision, the relationship between competition and the propensity to export should mirror the relationship between competition and the intensity of innovation activities, which according to Aghion et al. (2005) follows an inverted-U. Using a panel of Korean manufacturing plants over the period 1988 to 1999, we find indeed an inverted-U relationship between the firm‘s propensity to export and the degree of market competition. This result is robust to the inclusion of sunk costs, the presence of spillovers from other exporters, and other factors that are commonly considered to affect the firm‘s export decision.